Demurrer_to_firstamended_complaint

Demurrer

Cal. Super. - 4th Dist.May 18, 2018

P O R T A L E S L A W , P C 20 0 N. MA IN ST ., S E C O N D FL . S A N T A AN A, CA 92 70 1 T: ( 7 1 4 ) 4 2 6 - 9 0 1 0 F: ( 7 1 4 ) 5 6 9 - 0 5 0 9 ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ELECTROMICALLY FILED Superior Court of California, County of Orange 09/28/2018 at 04:43:00 FM Clark of the Superior Court By Jeanette Torres-Mendoza, Deputy Clerk ALEJANDRO PORTALES, ESQ. (SBN 202992) PORTALES LAW, PC 200 N. Main St., Second Fl. Santa Ana, California 92701 T: (714) 426-9010 alex @portales-law.com Attorneys for Equaltox, LLC, Equaltox, Inc., Cranford L. Scott, MD & Cranford L. Scott, MD, Inc. SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF ORANGE, CENTRAL JUSTICE CENTER BLUE CROSS OF CALIFORNIA, et al.; CASE NO. 30-2018-00993688-CU-FR-CJC Plaintiffs, ASSIGNED FOR ALL PURPOSES TO: Vs. Judge: Layne H. Melzer Dept.: C12 EQUALTOX, INC., etal, Date: December 6, 2018 Defendants. Time: 2:00 p.m. Res.: 72900669 EQUALTOX’S NOTICE AND DEMURRER TO BLUE CROSS’ FIRST- AMENDED COMPLAINT; PORTALES DECLARATION RE CCP §430.041 Filed: May 18, 2018 Trial: None TO EACH PARTY AND THEIR COUNSEL OF RECORD: YOU ARE HEREBY NOTIFIED THAT defendants Equaltox, LLC, erroneously sued as Equaltox, Inc., a professional corporation, and Cranford L. Scott, MD (DR. SCOTT) and Cranford L. Scott, MD, Inc. (PRACTICE)(collectively, SCOTT)(all defendants collectively, EQUALTOX unless context dictates otherwise) demur to Blue Cross of California dba as Anthem Blue Cross’ and Anthem Blue Cross Life and Health Insurance Company’s (collectively, BLUE CROSS) First- Amended Complaint (FAC) and its causes of action (COA) because it fails to state a cause of action and /or because the COA’s are uncertain and there is a defect in parties. Counsel appears specially for Equaltox, Inc., an improper party. EQUALTOX bases its demurrer on the FAC and its attachments, the Memorandum, the file EQUALTOX’S NOTICE AND DEMURRER TO BLUE CROSS’ FIRST-AMENDED COMPLAINT; PORTALES DECLARATION RE CCP §430.041 P O R T A L E S L A W , P C 20 0 N. MA IN ST ., S E C O N D FL . S A N T A AN A, CA 92 70 1 T: ( 7 1 4 ) 4 2 6 - 9 0 1 0 F: ( 7 1 4 ) 5 6 9 - 0 5 0 9 ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 in this matter, matters subject to judicial notice, and any evidence or argument presented at the hearing of the motion. The demurrer will be heard on December 6, 2018, at 2:00 p.m., or as soon thereafter as the matter may be heard, in Department C12 of the above-entitled court, located at 700 Civic Center Dr. West, Santa Ana, CA 92701. Dated: September 28, 2018 PORTALES LAw, PC Pe | Alejandro Portales, Esq. Attorneys for Equaltox, LLC, Equaltox, Inc., Cranford L. Scott, MD & Cranford L. Scott, MD, Inc. Z EQUALTOX’S NOTICE AND DEMURRER TO BLUE CROSS’ FIRST-AMENDED COMPLAINT; PORTALES DECLARATION RE CCP §430.041 P O R T A L E S L A W , PC 20 0 N. M A I N ST ., S E C O N D FL . S A N T A A N A , CA 92 70 1 T: (7 14 ) 4 2 6 - 9 0 1 0 F: (7 14 ) 56 9- 05 09 ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 — 111 111 DEMURRER TO COMPLAINT: As to the Complaint, generally because: a. There is a defect of parties because: 1. Equaltox, Inc. has never conducted any business with anyone including plaintiffs; b. The pleading does not state facts sufficient to constitute a cause of action; First Cause of Action for Fraud — Intentional Misrepresentation (COAT) because: a. The pleading does not state facts sufficient to constitute a cause of action because: 1. It is uncertain because it lacks the specificity required by law. 2. It fails to state damages Second Cause of Action for Fraud — Concealment (COA2) because: a. The pleading does not state facts sufficient to constitute a cause of action because: 1. It is uncertain because it lacks the specificity required by law. 2. It fails to show any duty to disclose. 3. It fails to state damages. Third Cause of Action for Violation of Bus. & Prof. Code §17200, et. seq. (COA3) because: a. The pleading does not state facts sufficient to constitute a cause of action because: 1. It is uncertain because it lacks the specificity required by law and fails to meet the statutory requirements for the action. Fourth Cause of Action for Declaratory Relief (COA4) because: a. The pleading does not state facts sufficient to constitute a cause of action because: 1. It seeks a ruling on past acts and not on rights under an agreement; and 2. It seeks a declaration of issues raised by the other causes of action. Open Book Account (COA6) because: a. The pleading does not state facts sufficient to constitute a cause of action; 1. The relationship between Cranford L. Scott, MD, Inc. is contractual and no provision was made to treat the relationship as an open book account. EQUALTOX’S NOTICE AND DEMURRER TO BLUE CROSS’ FIRST-AMENDED COMPLAINT; PORTALES DECLARATION RE CCP §430.041 P O R T A L E S L A W , P C 20 0 N. MA IN ST ., S E C O N D FL . S A N T A AN A, CA 92 70 1 T: ( 7 1 4 ) 4 2 6 - 9 0 1 0 F: ( 7 1 4 ) 5 6 9 - 0 5 0 9 ~N O N n e B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Dated: September 28, 2018 Respectfully submitted, PORTALES LAW, PC Ml Alejandro Portales, Esq. Attorneys for Equaltox, LLC, Equaltox, Inc., Cranford L. Scott, MD & Cranford L. Scott, MD, Inc. 2 EQUALTOX’S NOTICE AND DEMURRER TO BLUE CROSS’ FIRST-AMENDED COMPLAINT; PORTALES DECLARATION RE CCP §430.041 P O R T A L E S L A W , P C 20 0 N. MA IN ST ., S E C O N D FL . S A N T A AN A, CA 92 70 1 T: ( 7 1 4 ) 4 2 6 - 9 0 1 0 F: ( 7 1 4 ) 5 6 9 - 0 5 0 9 ~N O N n e B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Contents I. II. II. INTRODUCTION. ..c.ceeeeee eee eee ee eee eee eee e east eee ee ae eae eee ae es aa ease ae ae ee aenneeeaannaeeeaennaeaeannnns 1 A. DEFENDANTS DEMUR TO EACH COA EXCEPT THE BREACH OF CONTRACT COAG eeeeters e sree etree este ee sabe ee sabe ee stse ae ssbeaessae ans 1 B. EQUALTOX, INC. HAS NO RELATIONSHIP WITH BLUE CROSS AND IS INOT A LABORATORY ....ooiiiiieiiiiiieeeeeitie ee eitteeeesstaeae es ssasae se snnsseaesssssssesesssssseesssssesessssnsaseennns 1 ID ISTCUSSTONN, mx. 5.505055 SK 9555756 S45 SANE, 50 SRS AS45575 45 FASS SURES A349 SAAS SARAHB 2 A. THE FRAUD COAS HAVE NO MERIT BECAUSE BLUE CROSS’ FRAUD ALLEGATIONS FAIL TO ALLEGE THAT EQUALTOX HAD A DUTY TO REVEAL THE ALLEGEDLY CONCEALED FACTS OR THAT IT MISREPRESENTED A MATERIAL FACT WITH THE INTENT TO DEFRAUD; BLUE CROSS’ FRAUD ALLEGATIONS LACK THE SPECIFICITY REQUIRED BY LAW BECAUSE THEY FAIL TO IDENTIFY THE CORPORATE PERSONNEL WHO ALLEGEDLY DEFRAUDED IT .....oooooiiiiieet eee eee eee eae esse anensen 3 1. BLUE CROSS’ FRAUD ALLEGATIONS ARE CONCLUSORY AND ARE NOT ACCEPTED AS TRUE ON DEMURRER ......oouuttttiteee eee eee ee eeea ee eeeae ee eeeaaeeaennns 4 2. BLUE CROSS’ ALLEGATIONS LACK THE SPECIFICITY REQUIRED BY LAW AND ARE CONTRADICTORY AND CONFUSING AS ST ATED eeeeee eee —————aae ee ae at ———————aa ee tett———————————aoton——————— 5 3. BLUE CROSS WAS AWARE OF THE PRACTICE’S RELIANCE ON EQUALTOX’S CLIA CERTIFICATE TO INVOICE FOR THE LAB TESTS FOR AT LEAST 7 OF THE 11 MONTHS IT WAS INVOICED ......oeineeee ieee eee eee eee ee aeeeee eee es 7 4. BLUE CROSS ONLY ALLEGES THAT SCOTT RECEIVED MONEYS AND FAILS TO ALLEGE THAT EQUALTOX DAMAGED IT........ccccovvveenieenne. 8 B. BLUE CROSS AS A SOPHISTICATED CORPORATION IS NOT ENTITLED TO RELIEF UNDER SECTION 172000 ....... ooo ee eee ee eeeeee ee ee ee ee eeaeeeeaaaeaeasaenens 9 C. BLUE CROSS’S ACTION FOR DECLARATORY RELIEF IS DUPLICATIVE OF THE OTHER CAUSES OF ACTION AND FAILS TO STATE ANY RIGHT TO A DECLARATION OF RIGHTS... eee eee eee eee eee eee eee eee ee ee eee eee aera eee ae ae ee aeae ae aea as 13 D. THE OPEN BOOK ACCOUNT COA IS BARRED BECAUSE .....cccoovvvteeeeeeeeeeeeeeeaennn 15 CONCLUSION ....oovtittitteteteteetee eee eeeaeee eee eeeeeeee esas esses assesses seme sess ss sessssmsssmsmsssmnmsmnmnmsmnns 15 TABLE OF CONTENTS P O R T A L E S L A W , P C 20 0 N. MA IN ST ., S E C O N D FL . S A N T A AN A, CA 92 70 1 T: ( 7 1 4 ) 4 2 6 - 9 0 1 0 F: ( 7 1 4 ) 5 6 9 - 0 5 0 9 ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Cases Allstate Ins. Co. v. Roy Lee Fischer (1973) 31 Cal.App.3d 391 ...ccceiiiiiiiiiiiieeececeeeen 14 Baldwin v. Marina City Properties, Inc. (1978) 79 Cal.App.3d 393 .....ooiiiiiriiiiieeeeeee, 14 Brownfield v. Daniel Freeman Marina Hospital (1989) 208 Cal. App.3d 405.......ccccoovveerveenenne. 14 C.J.L. Construction, Inc. v. Universal Plumbing (1993) 18 Cal. App.4th 376 ........cccceuvenneee. 14, 15 Capella Photonics, Inc. v. Cisco Systems, Inc., N.D.Cal.2014, 77 F.Supp.3d 850 ......cccccevuveneeee. 13 Conrad v. Bank of America (1996) 45 Cal. App.4th 133 o.oo, 4,8,10 Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal. App. 3d 593 ....cccoviiiniiiiiiienen. 3 General of America Ins. Co. v. Lilly (1968) 258 Cal. App.2d 465 .....cc.cceuieiiirniinieciececneeneee 14 Hahn v. Mirda (2007) 147 Cal. APD Ah TAD ss conus isvussnss sovsass sswsssnss sosasss avsssso sass sxaassn is swosiss 5,89 Herrejon v. Ocwen Loan Servicing, LLC (E.D. Cal. 2013) 980 F.Supp.2d 1186 .......ccccecvveueenneen. 4 Joslin v. HAS. Insurance Brokerage (1986) 184 Cal. App.3d 369, 375...c...cooieivinieinieciececnen. 3 Lazar v. Superior Court (1996) 12 Cal.dth 63 1.......cccooiiiiiiiiiiieecie cece eee eserv s eens 6 Loomis Fruit Growers’ Ass'n v. California Fruit Exch. (1932) 128 Cal.App. 26 .....ccccceevuueennne. 14 Lopez v. Southern Cal. Rapid Trans. Dist. (1985) 40 Cal.3d 780 .......ccoccuvveieeiiiieieeiieieeeeiie e e 11 Mead v. Sanwa Bank California (1998) 61 Cal. App.4th 561 .......cccccoviiniiiiiiiiinencceceeen, 3,4 Nulaid Farmers Assn. v. La Torre (1967) 252 Cal. App. 2d 788, 791 ..c.vovvviviiiiiiiiiieeeeeee, 3 Shopoff & Cavallo LLP v. Hyon (2008) 167 Cal. App.4th 1489.......cooiiiiiiiiiiiiiiiieeeeeeeeece 3 Standard Brands of California v. Bryce (1934) 1 Cal.2d 718 ......covveeioiiieeiieeeeeeee e 14 Sunset Scavenger Corp. v. Florence Oddou (1936) 11 Cal. App.2d 92.......covviiivviinniiniieeneen, 14 Tarmann v. State Farm Mutual Auto. Ins. Co. (1991) 2 Cal. App. 4th 153 ....ccooiiiiiiiiiiiiiee, 6 Tarmann v. State Farm Mutual Auto. Ins. Co., supra, 2 Cal. App.4th at 157 ......cccccceviiriiinienneenn. 9 Watson Laboratories, Inc. v. Rhone-Poulenc Rorer, Inc. (C.D. Cal. 2001) 178 FoSUPDP.2A 1099... eee sree eebeeaesaeesaeeeeeea 11,13 Watson v. Sansone (1971) 19 Cal APP.3d 1 ...eooiiiiiiieee ee 15 Statutes Business and Professions Code section 17200, €t SEQ .....ccovvreerreeeriieeiieeeiiee n ces eiie ee seveens 10, 11 Code Cite. PROG. Zh 0) rms esmmnssemsmmsssmmonsnmmnssmsssmses s mess ssn sR EHRs a EES eS Res 3 TABLE OF AUTHORITIES ON D FL . 2 a a _2 = 2a ot = J = r= Zz 2 <3 = =o EAS] < < ZI < = & P O R T A L E S L A W , P C 20 0 N. MA IN ST ., ~N O N n e B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Code Civ. Proc. §1060. Code Civ. Proc. 430.10 TABLE OF AUTHORITIES P O R T A L E S L A W , P C 20 0 N. MA IN ST ., S E C O N D FL . S A N T A AN A, CA 92 70 1 T: ( 7 1 4 ) 4 2 6 - 9 0 1 0 F: ( 7 1 4 ) 5 6 9 - 0 5 0 9 ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM L INTRODUCTION A. DEFENDANTS DEMUR TO EACH COA EXCEPT THE BREACH OF CONTRACT COAS BLUE CROSS seeks to collect over $4,000,000.00 on the basis that it didn’t like how it was billed. Because BLUE CROSS pleaded fraud and statutory causes of action, it is required to plead them with specificity not on conclusions, contentions and deductions. BLUE CROSS has not stated a cause of action under COAs 1-4 against EQUALTOX or SCOTT. As aresult, EQUALTOX demurs to the FAC. SCOTT also demurs to COA 6 (Open Book Account) on the basis that it is barred by law because the relationship is governed by a contract. B. EQUALTOX, INC. HAS NO RELATIONSHIP WITH BLUE CROSS AND IS NOT A LABORATORY Equaltox, Inc., a corporation that Equaltox, LLC’s former counsel incorporated but that neither Equaltox, LLC nor its personnel ever used or accepted. (See Request for Judicial Notice (RIN) Exh. A, (printout of the Secretary of State’s Business Search detail showing that no Statement of Information was ever filed and no person is named as an officer or incorporator other than counsel). Other than conflating the two entities by defining them as one and the same, nothing in the FAC shows that Equaltox, Inc. had anything to do with the facts of this dispute. (FAC q1.) The FAC goes on to claim that “According to its website, Equaltox is a toxicology laboratory and full service reference laboratory that provides laboratory services such as blood testing.” (FAC 18.) FAC’s own allegations show that only Equaltox, LLC is a “toxicology laboratory and full service reference laboratory that provides laboratory services such as blood testing.” (FAC Exh. A.) BLUE CROSS claims that “Equaltox holds a Clinical Laboratory Improvement Amendments (‘CLIA”) Certificate of Compliance from the Centers for Medicare & Medicaid Services (‘CMS’).” (FAC 9.) The FAC shows that only Equaltox, LLC is a CLIA licensed laboratory. (FAC Exh. A.) An attachment to a pleading supersedes contrary allegations in the body of the complaint. (See infra.) Thus, Equaltox, Inc. has never adopted or used the corporation for any purpose and the FAC’s own allegations are contradicted by its attachments with respect to Equaltox, Inc., defendants demur to the inclusion of Equaltox, Inc. as a wrong party which BLUE CROSS knew or should have known MEMORANDUM P O R T A L E S L A W , P C 20 0 N. MA IN ST ., S E C O N D FL . S A N T A AN A, CA 92 70 1 T: ( 7 1 4 ) 4 2 6 - 9 0 1 0 F: ( 7 1 4 ) 5 6 9 - 0 5 0 9 ~N O N n e B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 was a wrong party when it filed the FAC because of its own attachments. II. DISCUSSION BLUE CROSS sues alleging EQUALTOX defrauded it of $4,000,000.00. BLUE CROSS, however, goes further and claims it is defending the interests of the public and seeks to invoke a public interest. BLUE CROSS also seeks a duplicative declaration of its rights. With respect to SCOTT, BLUE CROSS makes the same mistake as it makes between Equaltox, LLC and Equaltox, Inc. and conflates the acts of one with the other. SCOTT accepts as true for purposes of demurrer only that DR. SCOTT has a contract relationship with BLUE CROSS. (FAC {52.) BLUE CROSS seeks to recover for a breach of contract and an open book account despite the fact that persons in a contractual relationship cannot recover under an open book account unless the contract specially provides that the relationship be treated as an open book account. A demurrer is proper where the grounds for the objection to the pleading are found on the face of the pleading or by judicial notice. (Code Civ. Proc. § 430.30.) On the hearing of a demurrer, the reviewing court takes the facts alleged as true but not conclusions of law, contentions or deductions. (Shopoff & Cavallo LLP v. Hyon (2008) 167 Cal.App.4th 1489, 1509.) On demurrer, however, the Court may assume “the truth . . . of facts which may be inferred from those expressly pleaded. . . .” (Mead v. Sanwa Bank California (1998) 61 Cal.App.4th 561, 564.) Where the facts adduced on judicial notice disclose a fact fatal to the pleading, the Court may sustain a demurrer without leave to amend. (Nulaid Farmers Assn. v. La Torre (1967) 252 Cal.App.2d 788, 791 (in ruling on a demurrer where the complaint was devoid of a particular fact, the court could sustain the demurrer without leave to amend where the court’s records disclosed that the fact could not be truthfully alleged rendering the complaint meritless); see also Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal. App. 3d 593, 604 (“[A] pleading valid on its face may nevertheless be subject to demurrer when matters judicially noticed by the court render the complaint meritless.”); cf. Joslin v. HA.S. Insurance Brokerage (1986) 184 Cal.App.3d 369, 375 (“[J]udicial notice of matters upon demurrer will be dispositive only in those instances where there is not or cannot be a factual dispute concerning that which is sought to be judicially noticed.”) De MEMORANDUM P O R T A L E S L A W , P C 20 0 N. MA IN ST ., S E C O N D FL . S A N T A AN A, CA 92 70 1 T: ( 7 1 4 ) 4 2 6 - 9 0 1 0 F: ( 7 1 4 ) 5 6 9 - 0 5 0 9 ~N O N n e B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Facts in an exhibit attached to a complaint are deemed true and take precedence over contrary facts in the body of the pleading. (Mead, supra, 61 Cal.App.4th at 567-568 (“For purposes of demurrer, we accept as true both facts alleged in the text of the complaint and facts appearing in exhibits attached to it. If the facts appearing in the attached exhibit contradict those expressly pleaded, those in the exhibit are given precedence.”); see also Vallejo Development Company v. Beck Development Company (1994) 24 Cal.App.4th 929, 946.) A. THE FRAUD COAS HAVE NO MERIT BECAUSE BLUE CROSS’ FRAUD ALLEGATIONS FAIL TO ALLEGE THAT EQUALTOX HAD A DUTY TO REVEAL THE ALLEGEDLY CONCEALED FACTS OR THAT IT MISREPRESENTED A MATERIAL FACT WITH THE INTENT TO DEFRAUD; BLUE CROSS’ FRAUD ALLEGATIONS LACK THE SPECIFICITY REQUIRED BY LAW BECAUSE THEY FAIL TO IDENTIFY THE CORPORATE PERSONNEL WHO ALLEGEDLY DEFRAUDED IT BLUE CROSS alleges two so-called COAs of fraud — misrepresentation and concealment. To do so, BLUE CROSS alleges a handful of facts but relies on its conclusions of law, contentions and deductions woven from those facts to establish the elements of fraud. BLUE CROSS offers no authority for those conclusions, contentions and deductions. Further, BLUE CROSS also fails to identify a single EQUALTOX employee, their authority to speak, when they spoke, to whom they spoke, or what was said or written. (Code Civ. Proc. 430.10, subd. (f).) The elements of fraud generally are: (1) misrepresentation; (2) knowledge of falsity; (3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting damage. (Conrad v. Bank of America (1996) 45 Cal.App.4th 133, 156; accord Herrejon v. Ocwen Loan Servicing, LLC (E.D. Cal. 2013) 980 F.Supp.2d 1186, 1202.) The elements of concealment are: (1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.” (Hahn v. Mirda (2007) 147 “3 MEMORANDUM P O R T A L E S L A W , P C 20 0 N. MA IN ST ., S E C O N D FL . S A N T A AN A, CA 92 70 1 T: ( 7 1 4 ) 4 2 6 - 9 0 1 0 F: ( 7 1 4 ) 5 6 9 - 0 5 0 9 ~N O N n e B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Cal.App.4th 740, 748.) Fraud must be pleaded with specificity. (Conrad at 156 (“In order to establish a cause of action for fraud a plaintiff must plead and prove in full, factually and specifically, all of the elements of the cause of action. [] General and conclusory claims of fraud will not suffice.” )(internal citations omitted).) 1. BLUE CROSS’ FRAUD ALLEGATIONS ARE CONCLUSORY AND ARE NOT ACCEPTED AS TRUE ON DEMURRER The basic facts BLUE CROSS alleges are: 1) Equaltox, LLC and Equaltox, Inc. (defined as the same entity) are each/both a laboratory (FAC (8); 2) Equaltox, LLC and Equaltox, Inc. are providers out of BLUE CROSS’ network (FAC q8); 3) Equaltox, LLC and Equaltox, Inc. are a Clinical Laboratory Improvement Amendments (CLIA) certified laboratory (FAC 9); 4) Equaltox, LLC and Equaltox, Inc. perform lab tests for BLUE CROSS insureds (FAC (10); 5) Equaltox, LLC and Equaltox, Inc. billed BLUE CROSS for lab tests on its insureds (FAC {10); 6) DR. SCOTT is EQUALTOX’s medical director (FAC 11); 7) DR. SCOTT is not personally CLIA certified (FAC q11); 8) DR. SCOTT owns the PRACTICE (FAC {12); 9) the PRACTICE has a CLIA waiver (FAC 12); 10) BLUE CROSS put EQUALTOX on “pre-payment review” due to suspicions it had (FAC 13); 11) after pre-payment review was instituted, EQUALTOX’s invoices to BLUE CROSS reduced and Scott’s invoices under his tax identification number (TIN) increased (FAC {14); 12) Scott provided EQUALTOX’s CLIA certificate when asked by BLUE CROSS for his CLIA certificate (FAC (15); 13) EQUALTOX used Scott’s TIN to avoid pre-payment review (FAC {16); 14) neither DR. SCOTT nor the PRACTICE could perform or bill for laboratory services without a CLIA certificate (FAC q16); 15) BLUE CROSS’ insured may only submit claims covered by their plan (FAC {17); 16) SCOTT billed for urine tests which were not covered (FAC {17); 17) BLUE CROSS paid Scott $4,387,960.51 for lab services performed by EQUALTOX (FAC q19); 18) Scott used his TIN from February 4, 2017 through January 24, 2018 to bill for EQUALTOXs lab services (FAC {19); and, 19) Scott submitted about 1,100 claims per month (FAC {19). On these alleged facts, BLUE CROSS concludes that by submitting lab samples to BLUE CROSS EQUALTOX is implicitly making a series of representations including that: 1) by using SCOTT’s TIN, EQUALTOX represented that Scott personally tested the lab samples; 2) by using -4- MEMORANDUM P O R T A L E S L A W , P C 20 0 N. MA IN ST ., S E C O N D FL . S A N T A AN A, CA 92 70 1 T: ( 7 1 4 ) 4 2 6 - 9 0 1 0 F: ( 7 1 4 ) 5 6 9 - 0 5 0 9 ~N O N n e B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 his/its TIN, EQUALTOX represented that SCOTT was licensed to conduct the tests; 3) by using his/ITS TIN, EQUALTOX represented that SCOTT was able to bill for the lab tests; 4) by submitting the lab samples EQUALTOX represented that the samples were properly coded; and, 5) by submitting the lab samples EQUALTOX represented that the samples met BLUE CROSS’ underwriting requirements. (FAC 23.) BLUE CROSS offers no legal, factual or contractual authority for those conclusions but uses them to put words in defendants’ mouths. Having created the strawman, BLUE CROSS then concludes the representations are false. (FAC 23.) BLUE CROSS’ conclusions do not flow from facts that could be inferred from the facts stated and some of BLUE CROSS’ allegations suffer from factual contradictions or inconsistencies. 2. BLUE CROSS’ ALLEGATIONS LACK THE SPECIFICITY REQUIRED BY LAW AND ARE CONTRADICTORY AND CONFUSING AS STATED BLUE CROSS must plead fraud “specifically; general and conclusory allegations do not suffice. . . . This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645 (internal quotes and citations omitted). To allege fraud against a corporation, BLUE CROSS must also “allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.” (Tarmann v. State Farm Mutual Auto. Ins. Co. (1991) 2 Cal. App.4th 153, 157.) With respect to the representations that BLUE CROSS claims were made by Equaltox, LLC or Equaltox, Inc. or Cranford L. Scott, MD, Inc. BLUE CROSS fails to attribute a single statement of any kind to “the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.” (Tarmann, supra, 2 Cal.App.4th at 157.) BLUE CROSS fails to meet that pleading requirement making the alleged representations hopelessly vague and ambiguous and lacking in the specificity required by law. This failure supports sustaining defendants’ demurrer to the fraud claims with leave to amend. With respect to DR. SCOTT, BLUE CROSS fails to distinguish or set out any statement he has made that was false except by generalized statements that “Scott Defendants” did or did not do something or allegedly made a representation by billing BLUE CROSS. It is not enough that one or -5- MEMORANDUM P O R T A L E S L A W , P C 20 0 N. MA IN ST ., S E C O N D FL . S A N T A AN A, CA 92 70 1 T: ( 7 1 4 ) 4 2 6 - 9 0 1 0 F: ( 7 1 4 ) 5 6 9 - 0 5 0 9 ~N O N n e B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 the other (DR. SCOTT or the PRACTICE) stated something. BLUE CROSS must state with particularity which of the two made the representation, “how, when, where, to whom, and by what means the representations were tendered.” (Lazar, supra, 12 Cal.4th at 645.) Because BLUE CROSS’ allegations are hopeless vague as to who made the alleged representations, the remaining factors — how, when, where, to whom, and by what means — are also missing. This failure supports sustaining the demurrer with leave to amend to the fraud allegations against DR. SCOTT. For example, BLUE CROSS alleges that EQUALTOX used SCOTT’s TIN. Well, SCOTT is two persons, DR. SCOTT and the PRACTICE. So, which is it? It cannot be both. In the Complaint, BLUE CROSS alleged: By submitting the claims for reimbursement under Dr. Scott’s TIN, Equaltox represented to Anthem that these laboratory testing services were performed by Dr. Scott. By submitting these claims under Dr. Scott’s TIN, Equaltox also represented to Anthem that Dr. Scott was licensed to perform and bill for such services. Further, by submitting these claims, Equaltox represented to Anthem that these services were properly coded and were covered benefits pursuant to Anthem’s policies with its members and/or insureds. (Comp. 922 (emphasis added).) In the FAC, BLUE CROSS makes significant changes to its previous factual allegations: By submitting the claims for reimbursement under the Scott Defendants’ TIN, Defendants represented to Anthem that these laboratory testing services were performed by the Scott Defendants. By submitting these claims under the Scott Defendants’ TIN, Defendants also represented to Anthem that the Scott Defendants were licensed to perform and bill for such services. Further, by submitting these claims, Defendants represented to Anthem that these services were properly coded and were covered benefits pursuant to Anthem’s policies with its members and/or insureds. (FAC 923 (emphasis added).) This is a substantial change in the facts. Originally, it was DR. SCOTT that used his TIN. In the FAC, it is either DR. SCOTT or the PRACTICE. Well, which is it? If BLUE CROSS is going to put words in a defendant’s mouth, BLUE CROSS should know to whom to attribute the statement. BLUE CROSS is alleging fraud so an allegation that this person or that person made a statement it the kind of vagary that is unacceptable under California law. While inconsistent Theories of recovery are permitted [],a pleader cannot blow hot and cold as to the Facts positively stated. [] To verify inconsistent facts alleged in a complaint indicates perjury in the matter. But the rule also applies to unverified pleadings. The code requirement is to state the Facts, not theories (Code Civ. Proc. s 426, subd. (2)): A statement of the facts constituting the cause of action, -6- MEMORANDUM P O R T A L E S L A W , P C 20 0 N. MA IN ST ., S E C O N D FL . S A N T A AN A, CA 92 70 1 T: ( 7 1 4 ) 4 2 6 - 9 0 1 0 F: ( 7 1 4 ) 5 6 9 - 0 5 0 9 ~N O N n e B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 in ordinary and concise language * * *. (Manti v. Gunari (1970) 5 Cal.App.3d 442, 449-450; see also, Larson v. UHS of Rancho Springs, Inc. (2014) 230 Cal. App.4th 336, 343-344 (“Moreover, any inconsistencies with prior pleadings must be explained; if the pleader fails to do so, the court may disregard the inconsistent allegations. Accordingly, a court is not bound to accept as true allegations contrary to factual allegations in former pleading in the same case.”)(internal edits in both citations omitted).) The statements that BLUE CROSS attributes to SCOTT are unsupported conclusions based on what BLUE CROSS claims an invoice implies or tacitly states. There is no support for such an assumption. On the contrary, there is a broad history of law which addresses the content of invoices and what is implied and what is not implied in an invoice. (See, e.g., Comm. Code §§2207, et seq. (where one merchant tries to impose terms on another via an invoice).) Under the Commercial Code, BLUE CROSS would have a high bar to impose unwritten terms or meaning to an invoice. Under pleading rules, BLUE CROSS is required to identify the statement made and the person making the statement. BLUE CROSS cannot rely on a statement it invents and puts in the defendants’ mouths. 3. BLUE CROSS WAS AWARE OF THE PRACTICE’S RELIANCE ON EQUALTOX’S CLIA CERTIFICATE TO INVOICE FOR THE LAB TESTS FOR AT LEAST 7 OF THE 11 MONTHS IT WAS INVOICED For BLUE CROSS’ fraud COAs to be actionable, BLUE CROSS must have been ignorant of the alleged falsehood or the concealment of the essential fact. (Conrad v. Bank of America, supra, 45 Cal. App.4th at 156; Hahn v. Mirda, supra, 147 Cal.App.4th 748.) BLUE CROSS’ ignorance of Equaltox’s involvement is feigned as its own allegations disclose. BLUE CROSS admits that for 11 months it accepted the invoices at issue in its allegations despite knowing for at least 7 of those 11 months that the Practice was submitting invoices under Equaltox’s CLIA certificate. (FAC {15 and 19.) So, if we accept as true that BLUE CROSS was deceived beginning in February 2017, it had knowledge of the deception by June 2017, four months later. After discovering the alleged deception, BLUE CROSS could no longer be defrauded or damaged. And, incredibly, BLUE CROSS alleges that despite its knowledge that it was allegedly defrauded in the past, states that “Defendants continue to submit improper claims for laboratory fe MEMORANDUM P O R T A L E S L A W , P C 20 0 N. MA IN ST ., S E C O N D FL . S A N T A AN A, CA 92 70 1 T: ( 7 1 4 ) 4 2 6 - 9 0 1 0 F: ( 7 1 4 ) 5 6 9 - 0 5 0 9 ~N O N n e B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 services under the Scott Defendants’ TIN after January 24, 2018, up to and including the present.” (FAC q19.) How could any such submissions, if actually made, be actionable fraud? Although it admits DR. SCOTT was EQUALTOX’s medical director, BLUE CROSS fails to show how he misrepresented his authority to invoice for samples tested at the laboratory he oversaw as a medical director. Yet, BLUE CROSS reaches the conclusion that neither DR. SCOTT nor the PRACTICE could personally test the samples nor could they bill for the testing. (FAC ]16.) COA2 incorporates the same allegations as COAl and adds conclusory language of concealment. (FAC qq32-41.) A key failure of COAZ2 is the failure to allege a credible duty on EQUALTOXs part to disclose the facts defendants claim deceived them — an essential element of the COA. (Hahn v. Mirda, supra, 147 Cal.App.4th at 748.) The FAC attempts to show duty on representations that BLUE CROSS invented and attributed to EQUALTOX. Defendants had an obligation to disclose because they affirmatively made representations to Anthem but did not disclose facts that materially qualify the facts disclosed, or render the disclosure likely to mislead. Specifically, Defendants represented that the Scott Defendants sought reimbursement for laboratory testing services, but failed to disclose that the services were actually performed by Equaltox, that Dr. Scott and his medical practice did not possess the requisite level of CLIA certification, or that many of the services billed were not covered benefits under Anthem’s insureds’ plans. These omissions render Defendants’ representations—that the Scott Defendants sought reimbursement for validly performed and covered services—false and misleading, thus triggering Defendants’ obligation to disclose. (FAC 34.) The allegations in this paragraph are premised on the false allegation that EQUALTOX “affirmatively” made representations that “materially qualify” the facts disclosed. EQUALTOX made no such representations. BLUE CROSS invented the representations and attributed them to EQUALTOX and then concludes there was a duty to disclose the facts BLUE CROSS invented but failed to attribute to single person in the corporate entities or to DR. SCOTT personally. (Lazar, supra, 12 Cal.4th at 645; Tarmann, supra, 2 Cal. App.4th at 157.) For this reason, EQUALTOX’s demurrer to the concealment allegations should be sustained with leave to amend. 4. BLUE CROSS ONLY ALLEGES THAT SCOTT RECEIVED MONEYS AND FAILS TO ALLEGE THAT EQUALTOX DAMAGED IT As to both COA1 and COA2, BLUE CROSS has failed to show how EQUALTOX damaged BLUE CROSS other than its conclusory allegations that it was damaged for 11 months despite -¥- MEMORANDUM P O R T A L E S L A W , P C 20 0 N. MA IN ST ., S E C O N D FL . S A N T A AN A, CA 92 70 1 T: ( 7 1 4 ) 4 2 6 - 9 0 1 0 F: ( 7 1 4 ) 5 6 9 - 0 5 0 9 ~N O N n e B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 knowledge of the alleged fraud for 7 of those months. Damages are an element of a fraud cause of action. (See, e.g., Conrad v. Bank of America, supra, 45 Cal.App.4th at 156.) BLUE CROSS repeatedly concludes it was damaged by EQUALTOX’s alleged fraud, but it states no facts in support of that allegation. BLUE CROSS a conclusory claim that it was damaged by a billing scheme. (FAC {19.) BLUE CROSS hedges its claim stating that “many” tests were not covered by its underwriting rules. (FAC {17.) BLUE CROSS fails to state how it was damaged when it knew since at least June 2016 that EQUALTOX was conducting the lab tests. BLUE CROSS tacitly admits that it made payment on the lab tests after it received the submissions. BLUE CROSS admits that EQUALTOX — a CLIA certified laboratory — conducted the tests. That indicates that its insureds’ samples were tested by a laboratory qualified to so. At most, BLUE CROSS alleges many tests were miscoded (without a single example of the wrong code used versus the proper code). Yet, BLUE CROSS seeks to recover every dime it paid on the lab tests, including both properly coded and allegedly miscoded submissions. The damages allegation is overreaching and improper as shown by the FAC’s own allegations. Thus, the damages allegations are hopelessly vague and ambiguous and thus, speculative at best. (Estate of Kampen (2011) 201 Cal.App.4th 971, 991 (“It is fundamental that damages which are speculative, remote, imaginary, contingent, or merely possible cannot serve as a legal basis for recovery.”) In sum, BLUE CROSS fails to plead fraud with the specificity required by law, it fails to allege the essential element of duty to disclose at all, it fails to show that EQUALTOX made any representations at all, and it fails to state how it was damaged with any specificity. For these reasons, EQUALTOX asks that the Court sustain its demurrer to the COA1 and COA2 with leave to amend. B. BLUE CROSS AS A SOPHISTICATED CORPORATION IS NOT ENTITLED TO RELIEF UNDER SECTION 17200 BLUE CROSS attempts to invoke the provisions of Business and Professions Code section 17200, et seq. (Section 17200) under the guise that its dispute with EQUALTOX is for the public good. Nothing could be further from the truth. BLUE CROSS is not entitled to relief under B&P Code section 17200, etc. because, although the allegations make a gratuitous claim to benefit the -9- MEMORANDUM P O R T A L E S L A W , P C 20 0 N. MA IN ST ., S E C O N D FL . S A N T A AN A, CA 92 70 1 T: ( 7 1 4 ) 4 2 6 - 9 0 1 0 F: ( 7 1 4 ) 5 6 9 - 0 5 0 9 ~N O N n e B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 public, the issue is a business issue and BLUE CROSS is not a member of the public for section 17200 action purposes. Further, BLUE CROSS fails to show unfairness as defined in law. Finally, BLUE CROSS’ unlawful allegation fails to show any illegality. The allegations must be pleaded with specificity. (Lopez v. Southern Cal. Rapid Trans. Dist. (1985) 40 Cal.3d 780, 795 (statutory causes of action must be pled with particularity).) Section 17200 has three actionable prongs: 1) unfair; 2) unlawful; and, 2) fraudulent business practices. (Bus. & Prof. Code §17200, et. seq.; Watson Laboratories, Inc. v. Rhone-Poulenc Rorer, Inc. (C.D. Cal. 2001) 178 F.Supp.2d 1099, 1117.) To support a claim that the unfair prong of section 17200 applies, BLUE CROSS makes the gratuitous statement that Equaltox’s billing scheme is unfair because it offends the established California public policy to protect consumers, and in this case Anthem’s members/insureds, from unethical, oppressive, unscrupulous, immoral and substantially injurious business practices. Indeed, the CLIA was enacted to ‘“set[] forth the conditions that all laboratories must meet to be certified to perform testing on human specimens.” 42 C.F.R. § 493.1. Equaltox’s practices deprive patients of access to reliable and regulated laboratory testing that is necessary for diagnosis, treatment, and prevention. (FAC 945.) An unfair practice is “conduct that threatens an incipient violation of an anti-trust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition.” (Watson Laboratories, Inc. at 1117.) For BLUE CROSS to allege a claim that an act is unfair under section 17200 the “alleged unfairness must be tethered to some legislatively declared policy or proof of some actual or threatened impact on competition.” (GreenCycle Paint, Inc. v. PaintCare, Inc. (N.D. Cal. 2017) 250 F.Supp.3d 438, 451.) Further, the conduct or practice is unfair “only if the conduct threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition. Where the same conduct alleged to be unfair under the UCL is also alleged to be a violation of another law, the UCL claim rises or falls with the other claims.” (Ibid.) Further, a pleading must make factual allegations of unfairness; conclusory allegations will not support a claim under the unfair prong. (Mangindin v. Washington Mut. Bank (N.D. Cal. 2009) 637 F.Supp.2d 700, 710.) -10- MEMORANDUM P O R T A L E S L A W , P C 20 0 N. MA IN ST ., S E C O N D FL . S A N T A AN A, CA 92 70 1 T: ( 7 1 4 ) 4 2 6 - 9 0 1 0 F: ( 7 1 4 ) 5 6 9 - 0 5 0 9 ~N O N n e B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Painting itself as the defender of the public, BLUE CROSS conclude that section 17200 has the “public policy to protect consumers, and in this case Anthem’s members/insureds, from unethical, oppressive, unscrupulous, immoral and substantially injurious business practices.” The law or public policy must be an antitrust law or threatens competition. This dispute addresses neither issue. BLUE CROSSs claim that “CLIA was enacted to ‘set[] forth the conditions that all laboratories must meet to be certified to perform testing on human specimens’” is meaningless. Nothing in the allegations show that EQUALTOX violated any CLIA requirement. On the contrary, the FAC admits in Exhibit A that Equaltox, LLC is a CLIA certified laboratory and there is no harm to the public by any test that was conducted. Despite BLUE CROSS’ claim that “Equaltox’s practices deprive patients of access to reliable and regulated laboratory testing that is necessary for diagnosis, treatment, and prevention, there are no facts that anyone but allegedly BLUE CROSS was harmed. An unlawful practice is any unlawful business practice. (Ibid.) BLUE CROSS alleges: Defendants’ billing scheme is unlawful because it violates Title 42, Chapter IV, Subchapter G, Part 493 of the Code of Federal Regulations, including 42 C.F.R. §§ 493.35 et seq., 493.43 et seq., and 493.55 et seq. Those sections provide that only entities with the requisite Certificate of Compliance or Certificate of Accreditation may perform certain laboratory tests, including moderate or high complexity laboratory tests. Dr. Scott does not possess a CLIA certificate. Cranford L. Scott, M.D., Inc. holds only a Certificate of Waiver, which does not encompass laboratory services that were unlawfully billed to Anthem by Defendants under the Scott Defendants’ TIN. 42 C.F.R. § 493.1800 also sets forth sanctions and criminal penalties for failure to comply with CLIA certification requirements. (FAC f44.) BLUE CROSS’ allegations that EQUALTOX engaged in unlawful conduct is belied by the FAC’s own claims and exhibits. Exhibit A to the FAC shows that Equaltox, LLC was at all times CLIA certified. (FAC Exh. A.) Further, the FAC’s allegations admit as much. (FAC {{8-9.) So, what part of the testing violates the law? The only reference to payment for lab tests in the CLIA regulations is in Subpart A: “Principal sanction means the suspension, limitation, or revocation of any type of CLIA certificate or the cancellation of the laboratory's approval to receive Medicare payment for its services.” (42 C.F.R. § 493.2; accord §§493.49, 493.57, 493.61, 493.1800, et. seq.) None of the citations to law in the COA impose any requirement on labs to obtain a CLIA certificate to obtain receive payments from anyone except Medicare. The sections refer to the CLIA certification -11- MEMORANDUM P O R T A L E S L A W , P C 20 0 N. MA IN ST ., S E C O N D FL . S A N T A AN A, CA 92 70 1 T: ( 7 1 4 ) 4 2 6 - 9 0 1 0 F: ( 7 1 4 ) 5 6 9 - 0 5 0 9 ~N O N n e B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 requirements only. Thus, BLUE CROSS has alleged no violation of any law and thus has failed to allege the elements of Section 17200’s unlawful prong. Moreover, even if there was some prohibition — which there is not — SCOTT did not violate any law because it used the services of a CLIA certified lab to conduct that business. So, the only violation of an interest that appears to be is a violation of BLUE CROSS’ plan to engage in anticompetitive business practices by stymying any out of network medical laboratory from doing business with its insureds. Finally, BLUE CROSS claims that EQUALTOX has engaged in fraudulent business practices. A fraudulent practice under section 17200 is one that deceives a member of the public. (Watson Laboratories, Inc., supra, 178 F.Supp.2d at 1121.) Defendants’ billing scheme is fraudulent because, as set forth above, Defendants falsely represented that (1) laboratory services were being performed by the Scott Defendants when they were in fact performed by Equaltox; (2) the Scott Defendants held the requisite CLIA certification to perform and be reimbursed for the laboratory services at issue when they did not; and (3) all of the services submitted to Anthem for reimbursement were covered benefits under Anthem’s insureds’ plans when many were not. At a minimum, Defendants failed to disclose, and actively concealed, the material facts that would have led Anthem to learn that laboratory services were being improperly billed. Defendants knowingly made these misrepresentations, or knowingly concealed these facts, with the intent to defraud Anthem and induce Anthem into paying claims for reimbursement that were improperly and unlawfully submitted. This resulted in, and was a substantial factor in causing, monetary harm to Anthem, which Anthem would not have incurred had it known of Defendants’ fraudulent billing practices. (FAC 946.) With respect to the fraud prong, Section 17200 provides protection for consumers not sophisticated business competitors. That is, sophisticated business competitors are not a member of the public for Section 17200 purposes. (See, e.g., Capella Photonics, Inc. v. Cisco Systems, Inc., N.D.Cal.2014, 77 F.Supp.3d 850.) For a sophisticated corporation to obtain relief under Section 17200 it must make a showing that the general public is deceived or that the public interest is at issue. (Ibid.; Watson Laboratories, Inc. v. Rhone-Poulenc Rorer, Inc., supra, 178 F.Supp.2d at 1121.) The FAC makes no allegation that consumers were deceived or that the public interest was harmed, nor could it. BLUE CROSS is suing for its own benefit against a competitor which bars the COA. (Watson Laboratories, Inc., supra, 178 F.Supp.2d at 1121.) BLUE CROSS fails to satisfy the requirements for any action under any of Section 17200’s =12= MEMORANDUM P O R T A L E S L A W , P C 20 0 N. MA IN ST ., S E C O N D FL . S A N T A AN A, CA 92 70 1 T: ( 7 1 4 ) 4 2 6 - 9 0 1 0 F: ( 7 1 4 ) 5 6 9 - 0 5 0 9 ~N O N n e B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 prongs and EQUALTOX asks that its demurrer to the COA be sustained without leave to amend. C. BLUE CROSS’S ACTION FOR DECLARATORY RELIEF IS DUPLICATIVE OF THE OTHER CAUSES OF ACTION AND FAILS TO STATE ANY RIGHT TO A DECLARATION OF RIGHTS BLUE CROSS seeks a declaration of its rights vis-a-vis EQUALTOX. Declaratory relief is appropriate for any “person . . . who desires a declaration of his or her rights or duties with respect to another . . . may, in cases of actual controversy relating to the legal rights and duties of the respective parties” (Code Civ. Proc. §1060.) The purpose of a declaratory judgment is to declare rights rather than decide issues. (Sunset Scavenger Corp. v. Florence Oddou (1936) 11 Cal.App.2d 92, 97; see also Loomis Fruit Growers’ Ass’n v. California Fruit Exch. (1932) 128 Cal. App. 265, 281 (“Our investigation of cases dealing with declaratory judgments leads to the conclusion that such a proceeding can only be invoked to declare rights and not to determine or try issues.”).) More specifically, an action for declaratory relief will not lie where the issue to be determined is the same as that in a pending action between the same parties. (Allstate Ins. Co. v. Roy Lee Fischer (1973) 31 Cal.App.3d 391, 394; accord Sunset Scavenger Corp., supra, 11 Cal.App.2d at 97; Loomis Fruit Growers’ Ass’n, supra, 128 Cal. App. at 281.) A cause of action for declaratory relief is improper when “as here, the cause of action has already accrued and the only question for determination is the ultimate liability of one party on account of consequential relief to which another is shown to be entitled, it has been held that the nature of the action is not a cause for declaratory relief but is defined by the subject matter of the accrued cause of action.” (C.J.L. Construction, Inc. v. Universal Plumbing (1993) 18 Cal.App.4th 376, 390-391 citing Standard Brands of California v. Bryce (1934) 1 Cal.2d 718, 721; accord, Brownfield v. Daniel Freeman Marina Hospital (1989) 208 Cal. App.3d 405, 414; Baldwin v. Marina City Properties, Inc. (1978) 79 Cal.App.3d 393, 407-408; General of America Ins. Co. v. Lilly (1968) 258 Cal.App.2d 465, 470-472.) A court may refuse to grant declaratory judgment where it is not necessary or proper under the circumstances. (Code Civ. Proc. §1061.) BLUE CROSS seeks a declaration as to -13- MEMORANDUM P O R T A L E S L A W , P C 20 0 N. MA IN ST ., S E C O N D FL . S A N T A AN A, CA 92 70 1 T: ( 7 1 4 ) 4 2 6 - 9 0 1 0 F: ( 7 1 4 ) 5 6 9 - 0 5 0 9 ~N O N n e B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 whether Defendants may continue their fraudulent billing practices going forward. Specifically, Defendants claim that, despite their fraudulent, concealed, and unlawful billing scheme, Defendants are entitled to retain the funds that Anthem paid for services that: (1) the Scott Defendants did not actually perform; (2) the Scott Defendants were not licensed to perform or collect reimbursement for; and (3) in many cases were not covered benefits under Anthem’s insureds’ plans. (FAC {50.) That statement borders on the absurd. Is BLUE CROSS really seeking a declaration of its rights to do business with someone it accuses of defrauding it? That is to say, BLUE CROSS wants to know if it must continue to allow EQUALTOX to defraud it. Moreover, BLUE CROSS also seeks a declaration as to “the reimbursement amounts procured from Anthem by way of such [allegedly fraudulent] practices.” Thus, BLUE CROSS seeks monetary relief as well. BLUE CROSS’ fraud COAs ask the Court to determine whether EQUALTOX defrauded it (the legal rights of the parties with respect to each other), and if so, for an order allowing BLUE CROSS to recover the moneys it claims EQUALTOX obtained from it by fraud (monetary relief). (FAC q920-41 (COAs 1&2).) The COA seeks the same relief. (FAC JJ48-50.) Thus, COAs 1-2 ask the Court to decide who is entitled to the money EQUALTOX allegedly received from BLUE CROSS which is the very same issue postured in the Declaratory Relief COA: was it defrauded and if so, to recover the money it claims it lost. A declaratory relief action is improper to decide this issue. (C.J.L. Construction, Inc., supra, 18 Cal.App.4th at 391.) BLUE CROSS, however, tries to extend the reach of its COA by trying to look to project the declaration to the future by the absurd claim that it seeks a declaration as to “whether Equaltox may continue its fraudulent billing practices going forward.” (FAC 50.) This is a transparent attempt to get a declaration where none is required. Is BLUE CROSS really trying to convince the Court that it would allow EQUALTOX to “defraud” it if the Court declared that EQUALTOX could do so? The matter is a matured claim for money within the jurisdiction of the Court. Nothing remains to be done but to pay or not to pay the moneys at issue. Although sought, no declaration of future rights is necessary or proper. (See, Watson v. Sansone (1971) 19 Cal.App.3d 1, 4.) Accordingly, because BLUE CROSS seeks an improper judicial determination of the issues raised in the remaining COAs, EQUALTOX asks the Court to sustain its demurrer to this COA without leave to amend this specific COA. -14- MEMORANDUM P O R T A L E S L A W , P C 20 0 N. MA IN ST ., S E C O N D FL . S A N T A AN A, CA 92 70 1 T: ( 7 1 4 ) 4 2 6 - 9 0 1 0 F: ( 7 1 4 ) 5 6 9 - 0 5 0 9 ~N O N n e B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 D. THE OPEN BOOK ACCOUNT COA IS BARRED BECAUSE BLUE CROSS seeks to recover moneys under and open book account against SCOTT. To recover on a book account, BLUE CROSS must prove: “(1) upon a book account whether consisting of one or more entries; (2) upon an account stated based upon an account in writing, but the acknowledgment of the account stated need not be in writing; (3) a balance due upon a mutual, open and current account, the items of which are in writing. . ..” (Code Civ. Proc. §337, 42.) That is to say, to prove the book account, BLUE CROSS must prove the existence of a book account, that the amounts due in the book account were an account stated and, that the contract between BLUE CROSS and SCOTT contained a provision to treat the contract as a book account. BLUE CROSS can prove none of those elements. BLUE CROSS cannot establish an open book account because BLUE CROSS has alleged in the FAC that SCOTT and BLUE CROSS were bound by a contractual relationship: Blue Cross of California Prudent Buyer Plan Participating Physician Agreement (Agreement). As a matter of law, such a relationship does not create an open book account unless the contract contains a provision specifically establishing a book account. (See, e.g., Tsemetzin v. Coast Federal Savings & Loan Assn. (1997) 57 Cal.App.4th 1334, 1343-44; Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co. (2004) 116 Cal. App.4th 1375, 1395, fn. 9.; H. Russell Taylor's Fire Prevention Service, Inc. v. Coca Cola Bottling Corp. (1979) 99 Cal.App.3d 711, 728 (where the parties have an express contract, the recording of entries does not establish an actionable account by implication).) Nothing in the FAC alleges that the Agreement contains any provision to treat the contractual relationship as an open book account nor could it truthfully do so. For this reason, EQUALTOX asks that the Court sustain its demurrer to this cause of action without leave to amend. IIL. CONCLUSION BLUE CROSS fails to state the elements of the causes of action it has alleged. The FAC is based on a series of unsupported conclusions of law, contentions and deductions which leave it without legal or factual support for its COAs. Accordingly, EQUALTOX asks the Court to sustain its demurrer in part without leave to amend (COAs for Section 17200, declaratory relief and open book account) and in part with leave to amend (COAs for fraud). -15- MEMORANDUM P O R T A L E S L A W , P C 20 0 N. MA IN ST ., S E C O N D FL . S A N T A AN A, CA 92 70 1 T: ( 7 1 4 ) 4 2 6 - 9 0 1 0 F: ( 7 1 4 ) 5 6 9 - 0 5 0 9 ~N O N n e B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Dated: September 28, 2018 PORTALES LAW, PC Pe] Alejandro Portales, Esq. Attorneys for Equaltox, LLC, Equaltox, Inc., Cranford L. Scott, MD & Cranford L. Scott, MD, Inc. -16- MEMORANDUM P O R T A L E S L A W , P C 20 0 N. MA IN ST ., S E C O N D FL . S A N T A AN A, CA 92 70 1 T: ( 7 1 4 ) 4 2 6 - 9 0 1 0 F: ( 7 1 4 ) 5 6 9 - 0 5 0 9 ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DECLARATION RE CODE OF CIVIL PROCEDURE SECTION 430.041 I, Alejandro Portales, declare: 1. Iam counsel of record for Equaltox, LLC, erroneously sued as Equaltox, Inc., a defendant in this action and for Cranford L. Scott, MD and Cranford L. Scott, MD, Inc. and I have personal knowledge of each fact stated in this declaration. This declaration is submitted pursuant to Code of Civil Procedure section 430.041. I met and conferred with plaintiff’s counsel via email on September 11, 2018. We did not reach an agreement on the issues raised. P o g Be BD Attached as Exhibit A is a true and correct copy of the email correspondence between counsel. Dated: September 28, 2018 Respectfully submitted, PORTALES LAW, PC Ml Alejandro Portales, Esq. Attorneys for Equaltox, LLC & Cranford Scott, MD DECLARATION RE CODE OF CIVIL PROCEDURE SECTION 430.041 P O R T A L E S L A W , P C 20 0 N. MA IN ST ., S E C O N D FL . S A N T A AN A, CA 92 70 1 T: ( 7 1 4 ) 4 2 6 - 9 0 1 0 F: ( 7 1 4 ) 5 6 9 - 0 5 0 9 ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PROOF OF SERVICE I am employed in the County of Orange, State of California. I am over the age of 18. My business address is 200 N. Main St., 2nd Floor; Santa Ana, CA 92701. On September 28, 2017, I served the within document(s) described as: EQUALTOX’S NOTICE AND DEMURRER TO BLUE CROSS’ FIRST-AMENDED COMPLAINT; PORTALES DECLARATION RE CCP §430.041 on the interested parties in this action as stated on the attached mailing list as follows: [] (MAIL) Iam not a party to the action and I deposited the document in a sealed envelope in the mail with postage prepaid. Code Civ. Proc. §1013a, subd. (1). [] (MAIL - BUSINESS) I am not a party to the action and I am readily familiar with the business’ practice for collection and processing of correspondence for mailing and know it deposits the mail with the US Postal Service the same day; I placed the document in a sealed the envelope with postage prepaid for collection and mailing following ordinary business practices. Code Civ. Proc. §1013a, subd. (3). [] (OVERNIGHT DELIVERY) I deposited the document in a sealed envelope in a facility maintained by an overnight service or other express service, or delivered to a courier or driver authorized by that service to receive documents with all fees paid. [X] (ELECTRONIC SERVICE) I electronically served the document on the date indicated below to the persons identified in the attached service list. Electronic service was agreed to by the parties or by operation of law including by application of Rules of Court, Rule 2.251(b)(1)(B). [] (PERSONAL SERVICE) I caused the document in a sealed envelope to be delivered to the persons in the attached service list at the address indicated in the service list. I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Date: September 28, 2017 Pe | Alejandro Portales PROOF OF SERVICE P O R T A L E S L A W , P C 20 0 N. MA IN ST ., S E C O N D FL . S A N T A AN A, CA 92 70 1 T: ( 7 1 4 ) 4 2 6 - 9 0 1 0 F: ( 7 1 4 ) 5 6 9 - 0 5 0 9 ~N O Y a B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 SERVICE LIST Attorney: Party: Kimberly A. Klinsport, Bar No. 259018 Blue Cross of California dba Anthem Blue FOLEY & LARDNER LLP Cross 555 South Flower St., Suite 3500 Los Angeles, CA 90071-2411 T: (213) 972-4500 F: (213) 486-0065 kklinsport@foley.com Anthem Blue Cross Life and Health Insurance Company SERVICE LIST